If you’ve ever read anything about 401(k) plans, you’ve likely heard that a 401(k) match is like free money from your employer. And maybe it sounded too good to be true—after all, nothing in life is free, right? Well, it actually is true. Employer matching contributions do come with some rules and limits imposed by both the IRS and employers, but matching does mean money will be put towards your retirement without you having to work more for it.
What is a 401(k) match?
If you're here, it's likely that you already know what a 401(k) is: an employer-sponsored retirement plan. This means your employer offers an account for you with the plan administrator (investment company) of its choosing, and you decide what portion of your salary—before taxes if you choose a traditional 401(k) plan, or after taxes if you choose a Roth 401(k) plan—gets deposited into it with each paycheck, for your retirement. These deposits are called contributions. Now, here comes the match.
A 401(k) employer match—or 401(k) company match—is when your employer contributes a certain amount of the company’s money to your retirement plan, based on the amount of your contributions. That's why it's considered “free money.” Employers who offer matching contributions do it at their own will, and you don't have to repay or work extra for this money.
Matching contributions aren't mandatory—not even the 401(k) plans are. Employers don't have to offer you one, but if they do, you should take advantage of it.
How does a 401(k) match work?
A 401(k) match works like two people cooperating towards a goal. You'll contribute a portion of your salary to your retirement plan and your employer will make a contribution based on that amount. But here's the kicker: The formula used to calculate the matching contributions varies between employers, because it's up to them to decide how they want to pitch in.
That said, there are three typical employer 401(k) match contributions systems. Here's a breakdown of each, with examples.
Dollar-for-dollar match
In this system, also known as full match or 100% match, the employer will match 100% of your contributions, up to a portion of your salary.
For example, let's say you earn $70,000 per year and your employer offers to match dollar-for-dollar of your contributions, up to 5% of your annual salary. In this scenario, the maximum amount your employer would contribute is $3,500. If your own contributions exceed $3,500, that’s OK—but the additional contribution amount won't be matched.
Dollar amount match
This one is quite simple: In a dollar amount match arrangement, the employer offers to match a set amount for each employee. For example, your employer offers to match the first $3,000 of your contributions to your 401(k).
Partial match
Also known as stretch match, in this system the employer will match with a part of the money you put into your retirement plan, up to a certain amount of your annual salary.
For example, let's say you earn $60,000 per year. Your employer offers to match 50% of your contributions, up to 7% of your salary.
While 7% of your salary is $4,200, because your employer only offers a partial match of 50%, they’d contribute only half of the $4,200, or $2,100.
401(k) contribution limits: Does employer match count?
Any contribution to a 401(k) account is subject to the annual contribution limit determined by the IRS—and there's one limit for employee contributions, and another for combined contributions from employer and employee. The amounts are updated by the IRS every year to account for inflation.
- Employee contributions: In 2025, the employee contribution limit to a 401(k) is $23,500 for people under 50. If you're 50 or older, you're allowed to make catch-up contributions of an additional $7,500.
- Combined employer and employee contributions: In 2025, the combined contribution limit is $69,000 or the employee's total compensation, whichever is less. If you're 50 or older, an additional $7,500 for catch-up contributions is allowed.
Note: If you want an estimate of how much your retirement saves will be when you retire, Bankrate offers a 401(k) employer match calculator.
Highly compensated employees
If you happen to be what the IRS determines as a highly compensated employee (HCE), you might not be eligible for full 401(k) match contributions. By the IRS definition, an HCE is an employee who owns more than 5% of the company or whose compensation exceeds a set amount. For 2025, the amount is $160,000.
Because this is a lookback provision, your qualification for the current year is based on your compensation in the previous year. For example, in 2024 the compensation limit was $155,000. So, if you earned more than that, you would not be eligible for matching contributions in 2025.
Vesting schedules
While all the money you contribute to your 401(k) is always 100% yours, the employer matching contributions are subject to a vesting schedule. Vesting schedule refers to the number of years you must work for the same employer to have full ownership of their contributions.
According to the IRS, vesting schedules can vary, but they usually range from three to six years plus 1000 hours. Once you're fully vested, your employer's contributions become 100% yours and will remain in your account even if you quit or are fired.
FAQs
Do employers match Roth 401(k)?
Yes. Since 2022, employers can make matching contributions directly to a Roth 401(k). The contributions limits are the same for Roth 401(k)s and traditional 401(k).
What's the average employer 401(k) match in the U.S.?
In 2024, the average employer match contribution to 401(k) retirement plans was 4.8% of a worker's salary, according to Fidelity Investments, the largest 401(k) plans administrator in the country.
Does employer match count towards 401(k) limit?
Yes, and the limit amount is usually updated annually by the IRS. For instance, the 2024 401(k) limit, including employer match, was $69,000—which remains the same for 2025. If you're 50 or older, an additional $7,500 for catch-up contributions is allowed.